Seeking useful patterns wherever they appear.

More bad startup ideas

Garry Tan published a great piece yesterday titled “Travel planning software: the most common bad startup idea“. And while I strongly agree with his (dark) assessment of that category of opportunity and have seen my share of related pitches, there are several other equally bad ones that I see even more often. Inspired by Garry’s leadership on this theme I thought I’d throw out a few more:

Anything to do with local restaurants

Anything to do with music

Anything to do with bars + nightlife

Anything to do with dating

All of these can be bundled into a single meta-category, which I think of as the “entrepreneur’s first novel”. First-time novelists are encouraged to “write what you know”, and if you’re young and short on life experience “what you know” is usually limited to your own life, friends and relationships.

First-time entrepreneurs — and especially those without much work experience — tend to focus on the “problems” in their own life: where to go out with friends, what music to listen to, how to have more sex, etc.

There’s nothing intrinsically wrong with this impulse; investors generally like founders with deep domain expertise in the problem they set out to solve. But if that domain expertise is shared by thousands of other equally talented young founding teams, and the barriers to entry for technical founding teams are (effectively) zero, then picking one of these problems amounts to a choice of hypercompetition and a race to the bottom *before* you’ve written your first line of code.

“There are three steps to creating a truly valuable tech company. First, you want to find, create, or discover a new market. Second, you monopolize that market. Then you figure out how to expand that monopoly over time.”

You may not agree with the starkness of Thiel’s phrasing, but the basic principle is hard to fault: no matter how well you do it, it’s suboptimal (putting it nicely) to deliberately pursue the exact same market at the exact same time as thousands of other teams.

Now, each of the “opportunities” listed above has its own problems — local restaurants and bars have a math problem, music has a monopoly problem (oligopoly, actually, but let’s not quibble), and dating has a “free” problem. Just enough money has been made in each segment to offer a fig leaf of rationality to aspiring entrepreneurs, but most of it accrued to companies who pioneered the opportunity back in the bad old days, leaving precious few crumbs for more recent entrants.

Obviousness worked when the Internet was only “obvious” to geeks and early adopters, but it’s not our little secret any more and we all need to try harder to find stuff that TechCrunch and Hacker News haven’t already beaten to death.

No, it’s not easy. If it was, everyone would be doing it. That’s what makes it so damn interesting.